Explain the Rule Against Perpetuity.
Perpetuity literally means eternity or infinity, and is also generally understood as an indefinite, long time period, and in relation to transfer of property, it means creation of an interest in present, but which is to take effect after perpetuity.
Rule against perpetuity is the rule which is against a transfer making the property inalienable for an indefinite period or forever. Where a property is transferred in such a way that it become non transferable in future for an indefinite period, the property is tied up forever. This disposition would be transfer in perpetuity. Section 14 is based on the policy of law to ensure free and active circulation of property both for the purpose of trade and commerce as well for the betterment of the property itself. Frequent disposition of property is in the interest of the society and also necessary for the beneficial enjoyment of the property.
As per section 13 and 14 of the Transfer of Property Act, property may be transferred to any number of persons who are living at the date of the transfer. In this way, vesting of interest in favour of ultimate beneficiary may be postponed for any number of years. However, as Required under section 13 such ultimately beneficiary must be born before the termination of the last preceding interest. Accordingly there should not be any interval between the termination of preceding interest and its consequent vesting in the ultimate beneficiary; vesting of interest cannot be postponed even for a moment. Whereas vesting of interest under section 14 may be postponed but not beyond the life of a preceding interest and the minority of the ultimate beneficiary. Other words section 14 provides that vesting of interest may be postponed but not beyond a certain period. If in a transfer of property vesting of interest is postponed beyond this period as prescribed in this section, the transfer would be void as being a transfer for an indefinite period or a transfer in perpetuity.
In the case of Ram Newaz v. Nankoo, AIR 1926 All 283, A executed a sale deed of his land except for the 2 Bighas of land, in favour of B. The remaining 2 Bighas of his land should remain in his (A’s) possession for life and after his death in the possession of his descendants. He further mentioned that neither he nor his lineal descendants should have any right to alienate the property. And if none of his lineal descendants is alive then the B would become the owner of the property.
A died a little later of the execution of the deed and his son died childless. So, according to the deed B took possession of the property. A’s heir filed a suit to recover the possession of the property on the ground that the deed was void. Here A had created a life estate in his favour as well as his unborn descendants. According to Section 13, only absolute interest can be created in favour of an unborn person. Also, the terms of the document show that the property was made inalienable for an unlimited number of generations. Hence , the Court held the condition of the document was repugnant to law. A’s heirs had the title over the property.
Exception to Section 14
1. Gift to charities
Perpetuity is not repugnant in cases of religion or charitable endowments or wakf. In case of transfer for the benefit of the public in advertisement of religion, knowledge, health, commerce etc., the rule does not apply.
A lease is not a mere contract. It is a transfer of a right to possess and enjoy the property, and can be created for a specific number of years or even in perpetuity. However, rule against perpetuity is applicable only in those cases where there is a transfer of property, and the vesting of it is postponed beyond the period of perpetuity. It, therefore, does not apply in cases of lease.
3. Personal Contracts
Rule against perpetuity does not apply to personal agreements. It is not concerned with contracts as such, or with contractual rights and obligations as such. A contract to pay money to a person, his heirs or legal representatives upon a future contingency, which may happen beyond the period prescribed would be perfectly valid. It is therefore well established that the rule of perpetuities concerns rights of property only and does not affect the making of contracts which do not create rights of property.